Asian shares slump on China worries

HONG KONG: Asian shares slumped on Thursday, dragged lower by heightened concerns about the health of China’s economy after unexpectedly bearish minutes from the US Federal Reserve.

The dollar had tumbled as the Fed dampened expectations for a rate rise in September and outlined its fears about the global economy, sending oil prices to fresh lows.

Tokyo closed down 0.94 percent, or 189.11 points, at 20,033.52, as the yen strengthened against the greenback, adding to worries about Japan’s slowing exports.

Sydney fell 1.70 percent, or 91.6 points, to 5,288.6, dragged down by banking and resources shares, while Seoul dipped 1.28 percent, or 24.83 points, to 1,914.55.

Shanghai lost 1.50 percent in mid-afternoon trading after a volatile session the previous day, while Hong Kong continued its downward trend, falling 1.61 percent.

Dealers said markets remained clouded by uncertainties over China’s economy after the shock devaluation of the yuan last week added to fears it is slowing more than thought.

“The Fed appears to be heading toward a rate hike and this, against the backdrop of deflationary forces globally, is creating intense uncertainty,” Shane Oliver, head of investment at AMP Capital, told Bloomberg News.

“Investors have now grown used to near zero interest rates for more than six years in the US and there is naturally a fear that raising them will threaten the still fragile US and global economies.”

The dollar lost more than one cent against the euro on Wednesday after minutes from the Fed’s most recent meeting said that while conditions for a rate increase were “approaching” they had not yet arrived.

In Tokyo, the dollar strengthened slightly to 124.03 yen, from 123.89 yen in New York, but was sharply down from 124.32 yen in Asian trading on Wednesday.

The euro rose to $1.1125 and 137.98 yen from $1.1121 and 137.78 yen.

Minutes from the Fed, which met before China’s surprise devaluation of the yuan last week, also highlighted concerns about the global economy and particularly China that have weighed on shares and commodities.

The Fed warned “a material slowdown in Chinese economic activity could pose risks to the US economic outlook.”

Fears about Asia’s largest economy, which is the world’s top energy importer, and data showing a rise in US petroleum inventories pushed oil to a fresh six-and-a-half year low in New York.

Oil stocks rose 2.6 million barrels in the week ending August 14, according to the US Department of Energy.

In Asia, crude extended losses to trade a hair’s breadth away from the psychologically important $40 a barrel mark—a level not seen since the height of the financial crisis in 2009.